Theory and Regulation of Liquidity Risk Management in Banking.

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Abstract

Liquidity risk is now more important than it used to be in the past. The financial crisis has emphasised the importance of liquidity risk to the functioning of banking and financial system. The paper presents a theoretical and regulatory investigation of two types of liquidity risk: funding liquidity risk and market liquidity risk. The paper analyses the different approaches to measure the impact of funding and market liquidity risk in the economics and management of banks. The paper provides also an analysis of the organisational implications of the asset and liability management perspective of liquidity risk. Liquidity risk does not need to be covered by equity but by an adequate volume of liquid assets and highly liquid securities. This is the reason why the regulation of the liquidity risk in banking is focused on liquidity ratio-based financial constraints.
Lingua originaleEnglish
pagine (da-a)4-21
Numero di pagine18
RivistaInternational Journal of Risk Assessment and Management
Volume19
Stato di pubblicazionePublished - 2016

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Liquidity
Banking
Risk Management
Liquidity risk
Risk management
Liquid
Financial Crisis
Equity
Economics

All Science Journal Classification (ASJC) codes

  • Statistics, Probability and Uncertainty
  • Business and International Management
  • Management Science and Operations Research

Cita questo

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title = "Theory and Regulation of Liquidity Risk Management in Banking.",
abstract = "Liquidity risk is now more important than it used to be in the past. The financial crisis has emphasised the importance of liquidity risk to the functioning of banking and financial system. The paper presents a theoretical and regulatory investigation of two types of liquidity risk: funding liquidity risk and market liquidity risk. The paper analyses the different approaches to measure the impact of funding and market liquidity risk in the economics and management of banks. The paper provides also an analysis of the organisational implications of the asset and liability management perspective of liquidity risk. Liquidity risk does not need to be covered by equity but by an adequate volume of liquid assets and highly liquid securities. This is the reason why the regulation of the liquidity risk in banking is focused on liquidity ratio-based financial constraints.",
author = "Enzo Scannella",
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AB - Liquidity risk is now more important than it used to be in the past. The financial crisis has emphasised the importance of liquidity risk to the functioning of banking and financial system. The paper presents a theoretical and regulatory investigation of two types of liquidity risk: funding liquidity risk and market liquidity risk. The paper analyses the different approaches to measure the impact of funding and market liquidity risk in the economics and management of banks. The paper provides also an analysis of the organisational implications of the asset and liability management perspective of liquidity risk. Liquidity risk does not need to be covered by equity but by an adequate volume of liquid assets and highly liquid securities. This is the reason why the regulation of the liquidity risk in banking is focused on liquidity ratio-based financial constraints.

UR - http://hdl.handle.net/10447/193313

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